Capitalism is an economic system in which the production process is controlled
primarily by private firms operating in markets.
a. True
b. False
The federal income tax is an example of a
a. progressive tax.
b. regressive tax.
c. proportional tax.
d. value-added tax.
The questions of what to produce, how to produce, and for whom are answered by
a. free-market economies.
b. economies that are a mixture of planning and markets.
c. command economies.
d. all economic systems in some manner.
Markets will always create more efficient outcomes without government intervention.
a. True
b. False
A theory is an explanation of the causal mechanism behind observed phenomena.
a. True
b. False
Firms that maximize sales always produce more than profit-maximizing firms.
a. True
b. False
For the average American, innovation has led to:
a. an average income that is below many countries because of monies spent on R&D
b. an average income that is not paralleled anywhere in the world
c. an average income that exceeds that of all but the richest countries
d. None of the above is correct.
The lower left-hand corner of a graph where the two axes meet is called the graph’s
origin.
a. True
b. False
The long run is a period long enough so that one of the firm’s commitments ends.
a. True
b. False
Deregulation has led to higher prices.
a. True
b. False
An economist would say the price is too high for a certain service if
a. poor people couldn’t afford to buy it.
b. nobody could afford to buy it.
c. the price was above marginal cost.
d. it is an essential service and consumes a significant share of income.
When a few rival groups spend money in competition for a license that grants them a
monopoly for the provision of cable TV for an area, economists label this activity
a. perfect competition.
b. oligopoly.
c. monopolistic competition.
d. rent seeking.
Assuming that resources are specialized, the opportunity cost of an item increases as
production of it rises. Therefore, we expect that firms will produce more if
a. the price increases.
b. the price decreases.
c. the opportunity cost is greater than the price.
d. government asks firms to produce more.
e. the income of buyers increases.
The marginal productivity principle implies that
a. quantity demanded of an input normally declines as the input price falls.
b. at equilibrium, profit from the last unit of input will be zero.
c. for maximizing profit, marginal revenue product should be greater than price.
d. marginal productivity of inputs increase when price of inputs increase.
Figure 22-7
In Figure 22-7, where AB represents the production possibilities of Pestoland and CD
the production possibilities of Pastaland, Pastaland is
a. better at producing pasta and pesto than Pestoland.
b. better at producing pasta, but relatively inefficient in producing pesto.
c. relatively better at producing pasta than pesto.
d. relatively better at producing pesto than pasta.
High prices do not occur in laissez-faire markets.
a. True
b. False
An export subsidy helps reduce the selling price of a product by allowing individual
producers to charge less and still cover all of their production costs.
a. True
b. False
The way in which most persons pay their personal income tax is in the form of
a. quarterly payments throughout the year.
b. annual payment by April 15
c. monthly payments as part of mortgage payments.
d. payroll withholding during the year.
Marginal analysis involves looking at the extra costs involved in a decision.
a. True
b. False
Figure 12-1
In Figure 12-1, for a monopolistically competitive firm, long-run equilibrium can occur
only at the quantity indicated by which point?
a. A
b. B
c. C
d. D
Derivatives can be used to reduce risk but they also can be a source of risk in
themselves.
a. True
b. False
Under a progressive tax, the fraction of income paid in taxes
a. rises as income rises.
b. is unchanged as income changes.
c. falls as income rises.
d. is proportional to the change in income.
If one adopts a pure free market approach to depletable resources, then one can expect
the price of resources to
a. rise steadily.
b. fall steadily.
c. fluctuate in a random-walk fashion.
d. remain unchanged.